2009 (3) TMI 501 - HC - Income Tax

Unexplained money- The assessee which derived income from carriage contract for the assessment year 1996-97, filed a return disclosing total income of Rs. 5,76,133. After hearing the assessee the Assessing Officer added a sum of Rs. 1,04,7,720.30 to its income being the value of bitumen short supplied by the assessee to the various divisions of the Road Construction Department of the Government of Bihar. The assessee appealed before the Commissioner (Appeals) who deleted the additions. On appeal by the department, the Appellate Tribunal on the basis of claim of non-delivery by the executive engineers of the Road Construction Department before the Assessing officer repelled the plea of the assessee that it had delivered the bitumen. Held that- the assessee was in the business of contract carriage and in that capacity it lifted the bitumen to be supplied to the Road Construction department but having not supplied it to the owner, the assesee was the owner of the bitumen within the meaning of section 69A of the Act. The condition precedent for invoking section 69A of the Act existed and it would be liable to pay tax on the value of bitumen. Therefore, the confirmation of addition u/s 69A of the Act amounting to Rs. 1,04,71,720 was legal and valid.

Summary

Issues Involved:
1. Legality and validity of the addition under section 69A amounting to Rs. 1,04,71,720.
2. Whether the addition could be sustained in the absence of the condition precedent for invoking section 69A of the Income-tax Act.
3. Justification of the Tribunal in sustaining the addition under section 69A on account of short supply of bitumen by the appellant, a transporter of goods.

Detailed Analysis:

1. Legality and Validity of the Addition under Section 69A:
The assessee, engaged in a carriage contract, filed a return disclosing an income of Rs. 5,76,133 for the assessment year 1996-97. During scrutiny, the Assessing Officer added Rs. 1,04,72,720.30 to the income, representing the value of bitumen short supplied to the Road Construction Department of Bihar. The Commissioner (Appeals) deleted this addition, but the Tribunal reversed this decision, citing that the delivery challans provided by the assessee were false and fabricated. The Tribunal noted that executive engineers confirmed non-delivery of 2090.40 m.t. of bitumen. The court upheld the Tribunal's findings, stating that the assessee, having lifted the bitumen but not supplied it, is liable to pay tax under section 69A.

2. Condition Precedent for Invoking Section 69A:
The court addressed the assessee's argument that there was no finding of ownership or sale of the bitumen. The court referenced the Supreme Court's decision in R. B. Jodha Mal Kuthiala v. CIT, which emphasized determining the person entitled to the income. The court concluded that the assessee, having lifted the bitumen for supply but not delivering it, is considered the owner for tax purposes. The court distinguished the cited case, noting that the Tribunal had found the assessee to be the owner of the bitumen based on the facts.

3. Justification of the Tribunal in Sustaining the Addition:
The court rejected the assessee's contention that bitumen does not qualify as a "valuable article" under section 69A. The court clarified that any article with value falls under this category, and the value can be deemed income if the assessee fails to offer a satisfactory explanation. The court also dismissed the argument that the cost, not the value, of the bitumen was added, noting that the cost was rightly considered as the value since there was no claim of sale at a lower price.

Conclusion:
The court affirmed the Tribunal's decision, holding that the addition under section 69A was legal and valid. The court found that the conditions for invoking section 69A were met and that the assessee was the owner of the bitumen for tax purposes. All three substantial questions of law were answered in the affirmative, against the assessee and in favor of the Revenue. The appeal was dismissed without any order as to costs.